Facts:

The case involves Tomas Ang as the petitioner and Associated Bank and Antonio Ang Eng Liong as the respondents. The events leading to the case began on August 28, 1990, when Associated Bank, formerly known as Associated Banking Corporation, filed a collection suit against Antonio Ang Eng Liong and Tomas Ang for two promissory notes they executed as principal debtor and co-maker, respectively. The loans, amounting to P50,000 and P30,000, were obtained on October 3 and 9, 1978, and were to be paid by January 31, 1979, and December 8, 1978, respectively. The bank claimed that despite repeated demands for payment, the defendants failed to settle their obligations, resulting in a total indebtedness of P539,638.96 as of July 31, 1990.

Antonio Ang Eng Liong admitted to securing a loan of P80,000 but contended that the bank should provide a more reasonable computation of the amount owed, alleging excessive interest and charges. Tomas Ang, on the other hand, raised several defenses,...

Facts:

Parties and Nature of the Case

• Associated Bank (formerly Associated Banking Corporation), petitioner in the appeal but originally the plaintiff, filed a collection suit against Antonio Ang Eng Liong and Tomas Ang for non-payment of promissory notes.
• The promissory notes, executed on October 3, 1978 (PN-No. DVO-78-382) and October 9, 1978 (PN-No. DVO-78-390), evidenced loans amounting to P50,000 and P30,000, respectively, with terms for joint and several liability.

Loan Terms and Computation of Debt

• The notes provided for payment on specific due dates (January 31, 1979, and December 8, 1978) and stipulated additional charges:
• A 14% per annum interest rate.
• A 2% service charge per annum.
• A 1% penalty charge per month from the due date until full payment.
• Attorney’s fees amounting to 20% of the outstanding obligation.
• Subsequent amendments and disclosure statements further clarified the installment structure and computations, resulting in a total indebtedness reaching hundreds of thousands of pesos by July 31, 1990.

Proceedings in the Trial Court

• On August 28, 1990, Associated Bank initiated the suit for collection of the sums due under the promissory notes.
• During pre-trial, issues arose including an ex-parte motion to declare Antonio Ang Eng Liong in default for failing to submit his pre-trial brief.
• The trial court rendered a decision on February 21, 1991 ordering Antonio Ang Eng Liong to pay the principal, interest, service charges, and reduced penalty and attorney’s fees for his alleged bad faith.
• Tomas Ang, who also filed an Answer with counterclaims and cross-claims, raised several defenses, notably arguing that:
• The bank was not the true party in interest since it did not hold the promissory notes by value.
• He acted merely as an accommodation party without receiving actual consideration.
• The charges imposed by the bank (interest, penalty, service, and attorney’s fees) were excessive and imposed without his knowledge or consent.
• The dismissal of his cross-claims was predicated on the trial court’s determination of jurisdiction and finality due to default.

Procedural History and Pre-Appeal Developments

• After the trial court rendered its decision, the bank proceeded with executing its judgment by issuing a writ of execution.
• Tomas Ang filed motions to dismiss on the ground of lack of jurisdiction—arguing that the issuance of a default against Antonio Ang Eng Liong rendered his cross-claims inoperative.
• The Court of Appeals later intervened:
• The appellate court reversed portions of the trial court’s proceedings including the ex-parte hearing and the default declaration.
• It also re-examined the issue as to whether the bank was the “holder” of the notes, particularly in view of the transfer arrangements with the Asset Privatization Trust.
• Ultimately, the appellate court upheld that the bank retained the status of “holder” under Sec. 191 of the Negotiable Instruments Law.

Controversial Transfer to the Asset Privatization Trust

• The case involved a complicated transfer of the non-performing promissory notes to the Asset Privatization Trust, established under Proclamation No. 50 and related administrative orders.
• During the pre-trial conference, it was admitted that at the time of filing the collection suit, the notes were under the authority of the Asset Privatization Trust.
• Nonetheless, subsequent developments (notably the “buy-back” of the bank by its former owner) restored the bank’s standing as the effective “holder.”

Issues Raised on Appeal and Petition for Certiorari

• The bank raised errors regarding:
• The lower court’s dismissal of the complaint on the ground that it was not the “holder” of the notes.
• Inadequacies in the computation of interest and charges, with allegations of fraudulent representation through docket fee deficiencies.
• Procedural irregularities concerning the service of appeal documents to Antonio Ang Eng Liong.
• Whether issues not raised or properly assigned in the lower courts could be considered by the higher court.
• Tomas Ang reiterated defenses concerning the nature of his accommodation and surety responsibilities and the alleged preclusive effects of defaults and non-service on Antonio Ang Eng Liong.

Issue:

Holder Status and Party in Interest

• Whether the bank was the “holder” of the promissory notes at the time the collection suit was filed or if the Asset Privatization Trust, as intervening transferee, should have been the proper party.
• Whether the bank’s claim against Tomas Ang in his capacity as an accommodation party remains valid, even with the knowledge that he did not receive valuable consideration.

Jurisdictional and Procedural Concerns

• Whether the trial court acquired proper jurisdiction given issues such as:
• The filing and computation of docket fees.
• The alleged failure of the bank to serve notice of its appeal and appeal brief on Antonio Ang Eng Liong, resulting in potential preclusory effects.
• Whether the appellate court erred in raising issues or errors not assigned by the parties in the lower courts.

Validity and Computation of Financial Claims

• Whether the computation of interest, service charges, and penalty fees by the bank—particularly with claims of compounded capitalized interest—was legally and factually correct.
• Whether the alleged hidden or misrepresented amounts in the complaint and subsequent docket fee deficiencies affect the court’s jurisdiction or the merits of the collection suit.

Application of Contractual and Surety Principles

• Whether Article 2080 of the Civil Code is applicable in discharging petitioner Tomas Ang from his obligations as an accommodation maker, given the bank’s failure to serve notice on Antonio Ang Eng Liong.
• Whether real and personal defenses such as extensions of time, alleged fraudulent collusion, insolvency of the principal debtor, and issues regarding the delivery and completion of the promissory notes are meritorious and sufficient to bar the bank’s claims.

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Doctrine:

• (Subscriber-Only)